The Spillover Effect May Be Hurting Your Online Ads

Companies using online banner ads to increase revenue may be unknowingly boosting competitor sales as well.  A recent study conducted by Navdeep Sahni at Stanford University found that the “spillover” effect is unintentionally promoting competitors through advertisements. This phenomenon explains that, when a consumer sees an ad for a product, they are inadvertently reminded of a similar product from a different company.

The study focused on the restaurant industry, but Sahni says the spillover effect applies to marketing for any product. By examining consumers click through patterns on a restaurant review website, he found that running an online ad led to increased sales leads of 4 percent per individual competitor. This adds up when you consider each company has multiple competitors. Overall, competitors sales increased five times more than the company running the advertisement.

Sahni suggests to avoid the spillover effect, companies should emphasize what differentiates them from their competitors in their advertisements. He also said they should figure out what consumers value, such as low costs or expert reviews.

Bixy’s approach is another solution to avoiding the spillover effect. Through Bixy, the consumer has the opportunity to filter their account to see only brands they like. Let’s say a consumer is a loyal Nike shopper, and has told Bixy they want to see their ads. If Nike advertises a reward for shoes, it doesn’t have to worry if the consumer will be prompted to go buy a pair of Adidas. The right ads get to the right people, and both Nike and the consumer benefit.